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These years have taught us many lessons. One is that recovery after a recession which has been triggered by a financial crisis is slow. The leverage goes up fast but deleveraging is slow. But in Basel last weekend, where Central Bank Governors met at the BIS, it was noted that it is possible that both trend and productivity growth had started to falter even before the crisis. So the financial crisis deepened the economic slowdown, but this was not the only cause.
[Recent] years have also shown that the economic pillar of the Maastricht EMU was not robust enough. The contagion can be an especially pronounced problem in a monetary union and we need stronger framework and stronger tools to tackle it.
Banks have a vital role in providing finance to households and firms. This holds true especially in Europe where the share of the banks in the financing of companies has traditionally been large compared to capital market financing. It holds especially true in the case of financing of SME’s.
So, it is important that the regulatory reform as a whole supports and strengthens the banks´ ability to provide socially vital financial services efficiently. Various banking models can be successful in this task, if sufficient competition is maintained and decision-making is not distorted by expectations that some banks are too big or too important to fail.
The key objective is to ensure a banking sector that is capable of financing the real economy and fulfilling its other important functions. At the same time, this objective cannot be achieved without restoring and further enhancing the resilience of banks and the confidence in the banking sector as a whole.
There is need to have a banking sector that is sustainable and does not rely on any extraordinary taxpayer support.
This is the aim of the reforms, when more capital and better liquidity buffers are required. This is also the objective of the proposals, which aim at separating insured deposits from high risk-taking activities such as proprietary trading in securities. These prudential and structural reforms and the banking union are actually complementary, supporting each other.